To merge or not to merge?

Nisa-Today's members will be asking the board some tough questions ahead of a vote on the proposed merger between Costcutter and Nisa-Today's, despite what looks like an attractive settlement with some likely to scoop up to £80,000. Last week the holdings boards of Nisa-Today's agreed by a vote of 18-0 to merge the resources of the two groups, thus creating a new company. Nisa-Today's chairman Dudley Ramsden and Costcutter chairman Colin Graves will be holding a series of roadshows over the next six weeks to explain the proposals to member shareholders, pending a required final vote of approval by members in early July.Graves explained that the time was right for a merger as a new group could seek to redress the increasingly dominant position of Tesco in the convenience store sector. He said: "Costcutter and Nisa-Today's are both profitable businesses but we want to create a strong benchmark for the future. The more we get together, the stronger we are."The merger is being financed by Icelandic investment-backed Kaupthing, which took a minority shareholding in Costcutter earlier this year. Kaupthing will have an 18% stake in the new company, with 42% owned by the management team and the remaining 40% left in the hands of the members. Kishor Patel, owner of J-Stores in Bedfordshire, said that he would study the proposals closely to make sure they were in members' best interests.Kishor - who switched from Londis to Nisa because of Nisa-Today's mutual status - said: "It's not about the money. It is about delivering long-term sustainability for retailers and wholesalers."Bob Surridge, managing director of Nisa member Heads, said that he would also be keen to find out more about the proposals and feared that profits could be taken out of the business in a limited company.He warned: "As it stands, the more you buy then the bigger your share of the rewards. If this is likely to change we may have to consider going somewhere else."Nisa-Today's chief operating officer Neil Turton said that the management team at Nisa-Today's would not be taking cash out of the business and their existing shares would be rolled into the new company.

What's on the table?

? The new company will retain Costcutter and Nisa-Today's retail brands.? The deal is expected to deliver an initial cost saving of £6m with the removal of duplication. It could then deliver a further £4m saving in combined buying power.? The 960 retail and 330 wholesaler members of Nisa-Today's can expect to receive £80,000 from the deal. Based on 100 shares, members will receive an initial payment of £20,000 followed by two further payments of £15,000 after 12 and 24 months. Members will also receive equity in the new company worth around £30,000.? There will be three spaces on the new board for members, comprising a small retailer, a large retailer and a wholesaler.? Colin Graves and Dudley Ramsden will each hold a 10% stake in the new company.? There will be a six-week consultation period for Nisa-Today's members before a final vote in early July.

Nisa-Today's is still in good health despite the collapse of the merger with Costcutter last year and the recent sale of members such as Anglian Convenience Stores and Heald's Supermarkets, the group maintains.